I need to estimate the Net Debt / EBITDA ratio for 2022 using S&P methodology. ## Step 1: Understand S&P Methodology for Net Debt / EBITDA S&P methodology typically defines: - **Net Debt** = Total Debt (short-term + long-term borrowings) - Cash and Cash Equivalents - **EBITDA** = Earnings Before Interest, Taxes, Depreciation, and Amortization For EBITDA, I need to calculate it from the available data. S&P typically uses: - EBITDA = Operating Profit + Depreciation & Amortization + Interest (or uses various adjustments) Let me work with what's available. For a utility/TSO like TenneT, I'll need to reconstruct EBITDA. ## Step 2: Calculate Net Debt **Total Debt:** - Long-term Borrowings 2023-01-01: 19,006,000,000 EUR - Short-term Borrowings 2023-01-01: 709,000,000 EUR - Total Debt = 19,006,000,000 + 709,000,000 = 19,715,000,000 EUR Wait - I need to be careful about dates. The question asks for 2022. Let me check what "2022" means. The data has dates like "2023-01-01" which represents end of 2022 (beginning of 2023), and "2022-01-01" which represents end of 2021 (beginning of 2022). For "2022" performance, I should use: - Balance sheet items at 2023-01-01 (end of 2022) - Income statement items for 2022-01-01 to 2023-01-01 (2022 fiscal year) **Net Debt at end of 2022:** - Long-term Borrowings 2023-01-01: 19,006,000,000 EUR - Short-term Borrowings 2023-01-01: 709,000,000 EUR - Current Bank Overdrafts 2023-01-01: 0 EUR - Total Debt = 19,715,000,000 EUR - Cash and Cash Equivalents 2023-01-01: 6,547,000,000 EUR **Net Debt = 19,715,000,000 - 6,547,000,000 = 13,168,000,000 EUR** ## Step 3: Calculate EBITDA For S&P methodology, EBITDA typically = Operating Profit/Loss + Depreciation & Amortization + Interest Expense + Taxes From the income statement for 2022 (2022-01-01 to 2023-01-01): - Profit Loss From Operating Activities: -976,000,000 EUR - Depreciation And Amortisation Expense: 1,233,000,000 EUR - Finance Costs: 300,000,000 EUR - Finance Income: 43,000,000 EUR - Income Tax Expense Continuing Operations: -354,000,000 EUR (this is negative, meaning tax benefit) Let me think about this more carefully. "Profit Loss From Operating Activities" in IFRS terms is typically EBIT (or close to it). Let me verify: Operating Profit (EBIT) = Profit Loss From Operating Activities = -976,000,000 EUR But wait - is this already including or excluding certain items? Let me check if this is truly operating profit. Looking at the structure: - Revenue: 8,299,000,000 - Operating Expense: 9,395,000,000 - Share Of Profit Loss Of Associates And Joint Ventures: 120,000,000 - Profit Loss From Operating Activities: -976,000,000 So: 8,299,000,000 - 9,395,000,000 + 120,000,000 = -976,000,000 ✓ This "Profit Loss From Operating Activities" appears to be operating profit before financing costs. For S&P EBITDA: - EBITDA = Operating Profit + Depreciation & Amortization But I need to check if "Profit Loss From Operating Activities" includes D&A or not. Given that D&A is listed separately as an expense component, and the operating expenses include D&A, let me reconstruct: From the detailed operating expenses: - Employee Benefits Expense: 285,000,000 - Depreciation And Amortisation Expense: 1,233,000,000 - Miscellaneous Other Operating Expense: 322,000,000 - Other Gains Losses: -38,000,000 - Total of these: 285 + 1,233 + 322 - 38 = 1,802,000,000 But Operating Expense is 9,395,000,000. So there must be other components, likely including cost of sales/energy transmission charges. Actually, "Energy Transmission Charges" is 7,517,000,000. Let me check: 7,517 + 285 + 1,233 + 322 - 38 = 9,319. Close but not exact to 9,395. There might be other items. For EBITDA calculation, S&P typically uses: EBITDA = EBIT + D&A + Interest + Taxes, or more simply = Operating Profit before D&A + D&A Actually, let me use a cleaner approach. S&P Global Ratings methodology for regulated utilities: EBITDA can be calculated as: - Revenue - Cash Operating Costs (excluding D&A) Or from bottom up: - Net Income + Interest + Taxes + D&A Let me try: - Profit Loss (Net Income): -879,000,000 - Finance Costs: 300,000,000 - Finance Income: -43,000,000 - Income Tax Expense: -354,000,000 (this is negative, so tax benefit) - Depreciation & Amortization: 1,233,000,000 EBITDA = -879,000,000 + 300,000,000 - 43,000,000 - 354,000,000 + 1,233,000,000 = 257,000,000? Wait, that doesn't seem right. Let me reconsider. Actually, "Income Tax Expense Continuing Operations" of -354,000,000 means a tax benefit (negative expense). So adding back "taxes" would mean subtracting the benefit. Let me use the standard formula: EBITDA = Operating Profit + D&A + Interest + Taxes Where Operating Profit = EBIT = -976,000,000 But this already includes what? In IFRS, "Profit Loss From Operating Activities" typically includes operating items but excludes financing and taxes. So this is essentially EBIT. EBIT = -976,000,000 EBITDA = EBIT + D&A = -976,000,000 + 1,233,000,000 = 257,000,000 But this seems low. Let me check if "Profit Loss From Operating Activities" is truly EBIT or if it already includes some adjustments. Actually, looking more carefully at S&P methodology, they often adjust EBITDA for certain items. For utilities with pass-through costs, they might use a different measure. Let me also consider: Revenue - Energy Transmission Charges = 8,299,000,000 - 7,517,000,000 = 782,000,000. This "margin" plus other items... Actually, for a TSO, "Energy Transmission Charges" might be pass-through costs that are recovered. The true operating margin might be different. Let me try another approach. S&P typically calculates EBITDA as: EBITDA = Revenue - Operating Expenses (excluding D&A) Or from the cash flow perspective, we can also look at adjustments. From the cash flow statement: - Cash Flows From Used In Operations Excluding Eeg Working Capital: 596,000,000 - This is after working capital changes and some adjustments Let me go back to the standard definition and be more careful. EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization From the P&L: - Profit Loss Before Tax = -1,233,000,000 - Finance Income Cost = -257,000,000 (net) - So EBIT = Profit Loss Before Tax - Finance Income Cost? No wait... Profit Loss Before Tax = -1,233,000,000 This includes: Operating activities + Finance Income - Finance Costs Actually: Profit Loss From Operating Activities = -976,000,000 Finance Income = 43,000,000 Finance Costs = 300,000,000 Profit Loss Before Tax = -976,000,000 + 43,000,000 - 300,000,000 = -1,233,000,000 ✓ So EBIT (Operating Profit) = -976,000,000 Now, to get EBITDA, I need to add back D&A to EBIT: EBITDA = EBIT + D&A = -976,000,000 + 1,233,000,000 = 257,000,000 But wait - is EBIT the same as "Profit Loss From Operating Activities"? In IFRS, yes, this is typically the case. However, this gives a very low EBITDA. Let me reconsider if there are other adjustments S&P would make. Actually, looking at S&P methodology for regulated utilities, they often calculate "Adjusted EBITDA" which might include adding back certain items or using a different base. Let me also consider: the company has significant working capital from EEG (German renewable energy scheme). The cash flow shows "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596,000,000. But for EBITDA, we want the accrual-based measure. Let me verify my EBIT calculation by looking at the components: Revenue: 8,299,000,000 Less: Operating Expense: 9,395,000,000 Add: Share of profit of associates and JVs: 120,000,000 = Profit Loss From Operating Activities: -976,000,000 So Operating Expense includes all operating costs. If I add back D&A to Operating Expense: Adjusted Operating Expense (excluding D&A) = 9,395,000,000 - 1,233,000,000 = 8,162,000,000 Then "Gross Operating Profit" or EBITDA = Revenue + Share of profit - Adjusted Operating Expense = 8,299,000,000 + 120,000,000 - 8,162,000,000 = 257,000,000 Hmm, same result. But this seems inconsistent with the business model. Wait - let me re-read. "Share Of Profit Loss Of Associates And Joint Ventures" is 120,000,000. Is this part of operating profit or financing? It's typically part of operating activities. Actually, let me check if "Other Gains Losses" of -38,000,000 is included in operating or not. Looking at the components listed: - Employee Benefits Expense: 285 - Depreciation And Amortisation: 1,233 - Miscellaneous Other Operating Expense: 322 - Other Gains Losses: -38 Sum: 285 + 1,233 + 322 - 38 = 1,802 But total Operating Expense is 9,395. So the bulk (7,593) is not detailed. This is likely "Energy Transmission Charges" or similar pass-through items. Actually, looking more carefully: "Energy Transmission Charges" is 7,517,000,000. If this is part of operating expenses: 7,517 + 285 + 1,233 + 322 - 38 = 9,319. Still not 9,395. Difference is 76. There might be other items. But the total operating expense is given as 9,395. For S&P purposes, let me consider if they would use a different EBITDA measure. Actually, for utilities with significant pass-through costs, S&P sometimes looks at "operating EBITDA" before pass-throughs, or they might adjust for working capital effects. But sticking to standard definition: EBITDA = EBIT + D&A = -976,000,000 + 1,233,000,000 = 257,000,000 This gives a negative EBITDA if we use the negative EBIT, but actually: EBITDA = -976 + 1,233 = 257 million EUR positive. Wait, I need to double-check. Is "Profit Loss From Operating Activities" the same as EBIT? In IFRS, "operating profit" or "profit from operating activities" is typically before finance costs and taxes, so yes, this is EBIT. But let me also consider: S&P might calculate EBITDA differently. They might use: - Funds From Operations (FFO) or - Adjusted EBITDA that adds back certain items For European utilities, S&P Global Ratings typically uses: - EBITDA = Revenue - Operating Costs (cash costs) + Other Operating Income Or they might use a "utility-specific" EBITDA that excludes certain pass-through items. Actually, I realize I should look at this differently. The "Energy Transmission Charges" of 7,517 million on revenue of 8,299 million suggests this is largely a pass-through business. The "margin" is only 782 million. If we look at it: Revenue - Energy Transmission Charges = 782,000,000 Then subtract other cash costs: 285 (employee) + 322 (miscellaneous) - 38 (gains) = 569 Then + 120 (share of profit) = 333 Then + 1,233 (D&A) = 1,566... Hmm, this doesn't match. Let me just use the explicit formula. Actually, I think I need to be more careful. Let me use the cash flow approach to verify. From cash flow: Cash Flows From Used In Operations Excluding Eeg Working Capital = 596,000,000 This includes: - Operating profit adjustments - D&A: 1,233 - Gains on disposal: -38 - Undistributed profits of JVs: -120 (or is it +120?) - Dividends received: 92 - Provisions: 104 - Other non-cash: 1,347 - Working capital changes (excluding EEG): -736 - Income taxes paid: -231 Let me verify: Starting from Profit Loss -879 + D&A 1,233 = 354 + Gains on disposal 38 = 392 - Undistributed profits... wait, the adjustment is "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = 120,000,000. This means we subtract the equity-accounted profits to get to cash? Or add? Actually, in cash flow from operations, we start with net income and add back/adjust. The undistributed profits are subtracted because they represent non-cash income. So: -879 + 1,233 + 38 - 120 + 92 + 104 + 1,347 + ... working capital ... -231 Let me check: -879 + 1,233 = 354; +38 = 392; -120 = 272; +92 = 364; +104 = 468; +1,347 = 1,815 Then working capital excluding EEG: -736 (from the line "Increase Decrease In Working Capital Excluding Eeg Working Capital" = 736,000,000... wait is it positive or negative? "Increase Decrease In Working Capital Excluding Eeg Working Capital" 2022-01-01 - 2023-01-01: 736000000 EUR This is positive 736, but in the cash flow calculation, is it added or subtracted? Typically, increase in working capital is subtracted. But the sign convention in this data might be different. Actually, looking at the cash flow: "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596,000,000 (positive, meaning cash generated). If I do: 1,815 - 736 - 231 = 848. Not 596. So there are other items or my signs are wrong. Let me not get bogged down. Let me use the standard S&P approach. Actually, I realize I should check S&P's specific methodology. S&P Global Ratings for corporate issuers typically defines: EBITDA = Operating profit + D&A + Other non-cash charges Where Operating profit is before interest and taxes. For TenneT, given the data: - Operating Profit (EBIT) = -976,000,000 - D&A = 1,233,000,000 EBITDA = -976 + 1,233 = 257,000,000 EUR But this seems very low for a company with 19.7 billion in debt. The ratio would be extremely high. Wait - I need to reconsider. Is "Profit Loss From Operating Activities" truly EBIT? Let me check the IFRS definition. In IFRS, "profit or loss from operating activities" is not a defined term. However, looking at the structure: - Revenue - Operating Expenses - Share of profit of associates and JVs - = Profit/Loss from operating activities Then: - Finance income - Finance costs - = Profit/Loss before tax So yes, "Profit Loss From Operating Activities" is essentially operating profit before financing, i.e., EBIT. But wait - I need to check if this includes or excludes certain items. In some presentations, "operating activities" might exclude certain non-operating items. Actually, looking at the S&P methodology more carefully, they might use "Adjusted EBITDA" which for utilities could include adding back certain regulatory items or adjustments. However, let me also consider: the company made a loss in 2022. This was a difficult year for utilities due to energy crisis. The EBITDA might genuinely be low. But let me cross-check: if EBITDA is 257 million, and Net Debt is 13,168 million, the ratio would be 51.2x, which seems extremely high but might be correct for a distressed/loss-making period. Actually, I want to reconsider the EBITDA calculation. Let me look at whether "Profit Loss From Operating Activities" already includes D&A or not. The standard presentation is: Revenue - Cost of sales - Operating expenses (including D&A) = Operating profit But we also have "Depreciation And Amortisation Expense" explicitly stated. This suggests it's part of operating expenses. If I reconstruct: Revenue: 8,299 - Various operating costs including D&A + Share of profit of JVs: 120 = -976 (operating profit) So if operating profit is -976, and D&A is 1,233, then "EBITDA" = -976 + 1,233 = 257. But actually, I wonder if "Profit Loss From Operating Activities" is after some other adjustments. Let me check if there's any other interpretation. Hmm, actually I realize I may have made an error. Let me re-read the data format. The period "2022-01-01 - 2023-01-01" represents the fiscal year 2022. The balance sheet items at "2023-01-01" are the year-end 2022 balances. For the income statement, I need to use the flow items for 2022. Let me try a different EBITDA calculation that S&P might use. For regulated utilities, S&P sometimes calculates "S&P Adjusted EBITDA" which adds back certain items and uses a "utility-specific" approach. But without specific S&P adjustments, I'll use standard EBITDA. Actually, I want to double-check my net debt calculation. S&P methodology: Net Debt = Short-term debt + Long-term debt + Current portion of long-term debt + Bank overdrafts - Cash and cash equivalents - Liquid investments From the data: - Short-term Borrowings: 709 - Long-term Borrowings: 19,006 - Current Bank Overdrafts: 0 - Total Debt = 19,715 Cash and Cash Equivalents: 6,547 Net Debt = 19,715 - 6,547 = 13,168 million EUR Wait, I should also check if there are other debt-like items. S&P might include: - Lease liabilities (current and non-current) - Other financial liabilities But standard "Total Debt" in S&P methodology typically includes borrowings and bank overdrafts. Lease liabilities are sometimes included, sometimes not, depending on the specific methodology version. For conservative approach, let me include lease liabilities: - Noncurrent Lease Liabilities: 574 - Current Lease Liabilities: 155 - Total Lease Liabilities: 729 And other financial liabilities: - Other Noncurrent Financial Liabilities: 185 - Other Current Financial Liabilities: 550 - Total Other Financial Liabilities: 735 If I include all of these: Total Debt-like = 19,715 + 729 + 735 = 21,179 Net Debt = 21,179 - 6,547 = 14,632 But S&P typically focuses on "borrowings" for debt. Let me check standard practice. Actually, S&P Global Ratings methodology for "Total Debt" typically includes: - Short-term borrowings - Long-term borrowings (including current portion) - Bank overdrafts - Commercial paper - Notes payable Finance lease obligations might be included depending on the industry and specific criteria. For consistency with standard S&P corporate methodology, I'll use borrowings only: Net Debt = 19,715 - 6,547 = 13,168 million EUR Now for EBITDA, let me reconsider. I want to make sure I'm using the right figure. Actually, I realize I should look at whether "Profit Loss From Operating Activities" is truly the right starting point. In some IFRS presentations, this might include or exclude items differently. Let me try: Revenue - Operating Expense = 8,299 - 9,395 = -1,096 Then + Share of profit of JVs = 120 = -976 So "Profit Loss From Operating Activities" = -976. If I add back D&A to Operating Expense: "Adjusted Operating Expense" = 9,395 - 1,233 = 8,162 Then "Gross Operating Profit" = Revenue - Adjusted Operating Expense + Share of profit = 8,299 - 8,162 + 120 = 257 Same result. But wait - is "Share of profit of JVs" part of EBITDA? In standard EBITDA calculations, equity-accounted earnings are typically excluded because they're not part of core operations. However, they are part of EBIT. Actually, S&P typically includes dividends received from JVs in EBITDA or FFO, not the equity-accounted earnings. Let me check S&P methodology. For "Funds From Operations" (FFO), S&P uses: Net Income + D&A + Deferred taxes + Other non-cash items - Working capital changes For EBITDA, it's more straightforward: EBIT + D&A. But if "Profit Loss From Operating Activities" includes equity-accounted earnings, and standard EBIT also includes them, then EBITDA = EBIT + D&A = 257. However, I want to check if there's an alternative interpretation where we exclude equity-accounted earnings: EBIT excluding JVs = -976 - 120 = -1,096 EBITDA excluding JVs = -1,096 + 1,233 = 137 Or if we use only dividends received (92 from cash flow) instead of equity earnings: Some S&P calculations use this approach. Actually, let me look at this from a different angle. The cash flow shows "Cash Flows From Used In Operations Excluding Eeg Working Capital" = 596. This is after working capital changes but before EEG working capital. If I adjust this to get to EBITDA-like figure: Cash from operations excl EEG working capital = 596 + Income taxes paid = 231 - Working capital changes excl EEG = -736 (or +736 depending on sign) Actually, let me think about this more carefully. The cash flow statement shows: Starting from Net Income: -879 + D&A: 1,233 + Gains on disposal: 38 (wait, it's losses, so we add back losses) Actually "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = 38,000,000. Since "Other Gains Losses" was -38,000,000 (loss), we add back 38. - Undistributed profits of JVs: 120 (this is subtracting the non-cash portion) + Dividends received: 92 + Provisions: 104 + Other non-cash: 1,347 + Working capital excl EEG: 736 - Income taxes paid: 231 = Cash from operations excl EEG: 596 Let me verify: -879 + 1,233 + 38 - 120 + 92 + 104 + 1,347 + 736 - 231 = 2,420. That's not 596. Hmm, I must have signs wrong. Let me reconsider. Actually, "Adjustments For Undistributed Profits Of Investments Accounted For Using Equity Method" = 120. In the cash flow, starting from net income which includes 120 of equity-accounted profits, we need to subtract the undistributed portion to get to cash. But the dividend received of 92 is then added. So the net adjustment is -120 + 92 = -28. Let me try again with careful signs: -879 (net income) + 1,233 (D&A) + 38 (losses on disposal, added back) - 120 (undistributed profits, subtracted) + 92 (dividends received) + 104 (provisions) + 1,347 (other non-cash) + 736 (working capital... but is it + or -?) - 231 (taxes paid) If working capital increase is negative for cash flow: then "Increase Decrease In Working Capital" of 736 might mean decrease (positive for cash), so +736. Sum: -879 + 1,233 + 38 - 120 + 92 + 104 + 1,347 + 736 - 231 = 2,420. Still not 596. I must have something wrong. Let me check if "Other Gains Losses" is -38 (loss) and we add back 38, that's correct. Actually, wait. "Other Adjustments For Noncash Items" = 1,347,000,000. This might include various items. Let me see if some of these are already included. Actually, I think the issue is that "Cash Flows From Used In Operations Excluding Eeg Working Capital" of 596 is the final figure, and my reconstruction is missing something or has wrong signs. Let me not worry about this and just use the standard EBITDA definition. Going back: EBITDA = EBIT + D&A = -976 + 1,233 = 257 million. But I want to verify this makes sense. Let me also consider if S&P uses "Adjusted EBITDA" that normalizes certain items. For 2022, European utilities faced extreme volatility due to the energy crisis. TenneT's revenue increased from 5,524 to 8,299 (+50%), largely due to passing through higher energy prices. But their operating profit turned negative. Actually, looking more carefully at the business model: TenneT is a TSO (Transmission System Operator). Their revenue includes transmission charges that are largely pass-through. The "Energy Transmission Charges" of 7,517 million likely represents costs that are passed through to customers. If we think about "true" EBITDA excluding pass-throughs: Net revenue (after pass-through costs) = 8,299 - 7,517 = 782 Less: Employee benefits 285 Less: Miscellaneous other operating 322 Less: Other gains/losses -38 (i.e., +38 loss) Plus: Share of profit 120 = 782 - 285 - 322 - 38 + 120 = 257 Then + D&A 1,233 = 1,490? Wait, no. If I already excluded the pass-through, I need to think about this differently. Actually, let me try: "Core" operating profit before pass-through volatility: The company has D&A of 1,233 which is a real cost. Employee benefits of 285. Miscellaneous other of 322. Other losses of 38. If revenue excluding energy transmission charges is 782, and we have other costs of 285 + 322 + 38 = 645, then operating profit before D&A and JVs is 782 - 645 = 137. Plus JVs 120 = 257. Then - D&A 1,233 = -976. So "EBITDA" in the sense of pre-D&A operating profit = 257. Hmm, but this includes the share of JVs. If we exclude that: 137. Actually, I think I want to verify my understanding of "Energy Transmission Charges." Is this a cost or a revenue item? Looking at the label: "Energy Transmission Charges" 2022-01-01 - 2023-01-01: 7517000000 EUR. This is listed alongside Revenue, not as part of operating expenses. So it's likely a revenue item, not a cost. Wait, let me re-read. The data shows: "Revenue" 2022-01-01 - 2023-01-01: 8299000000 EUR "Energy Transmission Charges" 2022-01-01 - 2023-01-01: 7517000000 EUR So "Energy Transmission Charges" is a separate line item, likely a component of revenue or a related item. Given that it's listed separately from "Operating Expense", it's probably not an expense. Actually, looking at typical TSO financials, "transmission charges" could be: 1. Revenue from transmission charges (tariffs) 2. Costs of transmission charges paid to other parties Given the context and the fact that Operating Expense is 9,395 which is larger than Revenue, I think "Energy Transmission Charges" might actually be a revenue component. Or it could be that "Revenue" is the total and "Energy Transmission Charges" is the main component. Actually, in some European utility presentations, they show "Revenue" and then break out "Energy Transmission Charges" as the main revenue stream. So 8,299 total revenue includes 7,517 from energy transmission charges. This makes sense. So the 7,517 is part of revenue, not a separate cost. Given this, my EBITDA calculation stands: 257 million. But let me also consider an alternative S&P calculation. S&P sometimes uses "EBITDA before exceptional items" or makes other adjustments. The "Other Gains Losses" of -38 million might be considered exceptional. If we adjust for this: Adjusted EBIT = -976 + 38 = -938 (if losses are added back) Adjusted EBITDA = -938 + 1,233 = 295 Or if we look at it differently, the -38 is already included in operating profit, and we add it back to get "underlying" EBITDA = 257 + 38 = 295. But S&P typically doesn't adjust for small items like this unless they're clearly non-recurring. Actually, let me reconsider whether I should use a different EBITDA figure. Looking at the cash flow, "Other Adjustments For Noncash Items" is 1,347 million. This is quite large. What does it include? If I add D&A (1,233) + Other non-cash (1,347) = 2,580 million of non-cash items. This seems high. Actually, looking more carefully: "Other Adjustments For Noncash Items" = 1,347. This might include items like regulatory asset/liability adjustments, unrealized gains/losses, etc. For S&P EBITDA, should I include only D&A or also other non-cash items? Standard EBITDA is EBIT + D&A only. Other non-cash items are not typically added back in EBITDA (they might be in FFO or Adjusted EBITDA). Let me stick with standard definition: EBITDA = EBIT + D&A = -976 + 1,233 = 257. But actually, I want to double-check one more thing. Is "Profit Loss From Operating Activities" the same as "Operating Profit" or "EBIT"? In IFRS, IAS 1 requires presentation of "profit or loss from operating activities" but this is not a defined term. However, it's commonly understood as profit before financing and taxes. Given the structure: - Profit Loss From Operating Activities: -976 - Finance Income: 43 - Finance Costs: 300 - = Profit Loss Before Tax: -1,233 Yes, this confirms that -976 is before financing and taxes, so it's EBIT. Now, one more consideration: S&P might use "Adjusted EBITDA" that includes adjustments for the EEG working capital scheme or other regulatory mechanisms. The EEG (Erneuerbare-Energien-Gesetz) is Germany's renewable energy support scheme, and TSOs like TenneT are involved in collecting and distributing EEG surcharges. Looking at the cash flow, there are significant EEG working capital movements: - Increase Decrease In Working Capital Eeg Working Capital: -1,792 (2022) - This was -4,445 in 2021 These are working capital movements, not P&L items, so they don't affect EBITDA directly. Given all this, let me finalize my calculation: **Net Debt (end 2022):** - Long-term Borrowings: 19,006 - Short-term Borrowings: 709 - Total Debt: 19,715 - Less: Cash and Cash Equivalents: 6,547 - **Net Debt: 13,168 million EUR** **EBITDA (2022):** - EBIT (Profit Loss From Operating Activities): -976 - Add: Depreciation & Amortization: 1,233 - **EBITDA: 257 million EUR** **Net Debt / EBITDA = 13,168 / 257 = 51.24x** This is extremely high, but reflects the company's loss-making position in 2022 due to energy market volatility. However, I want to consider if S&P would use a different approach. For loss-making periods, S&P sometimes uses "Adjusted EBITDA" that normalizes certain items, or they might use average EBITDA over a cycle. Actually, let me reconsider whether I should include lease liabilities in debt. Under IFRS 16, lease liabilities are on the balance sheet. S&P methodology typically includes lease liabilities in total debt for the Net Debt calculation. If I include lease liabilities: - Noncurrent Lease Liabilities: 574 - Current Lease Liabilities: 155 - Total Lease Liabilities: 729 Adjusted Total Debt = 19,715 + 729 = 20,444 Adjusted Net Debt = 20,444 - 6,547 = 13,897 Net Debt / EBITDA = 13,897 / 257 = 54.07x But I'm not sure if S&P includes all lease liabilities or only finance leases. Under IFRS 16, all leases are capitalized. Actually, let me check the S&P Global Ratings methodology more carefully. In their "Corporate Methodology" (2019), they define: "Debt" includes: - Short-term and long-term borrowings - Lease obligations (both finance and operating, capitalized) - Hybrid instruments (to the extent treated as debt) - Pension deficits - Other debt-like obligations For "Total Debt" in the Net Debt calculation, they typically use "adjusted debt" which includes these items. However, for simplicity and consistency with common practice, I'll use borrowings plus lease liabilities: Actually, you know what, let me reconsider the EBITDA one more time. I want to check if "Depreciation And Amortisation Expense" of 1,233 is already included in "Operating Expense" of 9,395. From the detailed components given: - Employee Benefits Expense: 285 - Depreciation And Amortisation Expense: 1,233 - Miscellaneous Other Operating Expense: 322 - Other Gains Losses: -38 Sum of detailed: 285 + 1,233 + 322 - 38 = 1,802 But total Operating Expense is 9,395. So there's 7,593 of other operating expenses not detailed. This means D&A of 1,233 IS included in operating expenses. So when I calculate EBITDA = EBIT + D&A, I'm correctly adding back the D&A that was deducted to get from EBITDA to EBIT. EBITDA = Revenue - (Operating Expenses - D&A) + Share of profit = 8,299 - (9,395 - 1,233) + 120 = 8,299 - 8,162 + 120 = 257 Yes, this checks out. Now, I want to consider one more thing. Should I use "Average Net Debt" or "Year-end Net Debt"? S&P typically uses year-end or average depending on the context. For ratio calculations, they often use year-end balances or averages. If I use average Net Debt: Net Debt end 2021 = (Long-term 12,366 + Short-term 1,339 + Bank overdrafts 64) - Cash 3,204 = 13,769 - 3,204 = 10,565? Wait... Let me recalculate: End 2021 (2022-01-01): - Long-term Borrowings: 12,366 - Short-term Borrowings: 1,339 - Current Bank Overdrafts: 64 - Total Debt: 13,769 - Cash and Cash Equivalents: 3,204 - Net Debt: 10,565 End 2022 (2023-01-01): - Long-term Borrowings: 19,006 - Short-term Borrowings: 709 - Current Bank Overdrafts: 0 - Total Debt: 19,715 - Cash and Cash Equivalents: 6,547 - Net Debt: 13,168 Average Net Debt = (10,565 + 13,168) / 2 = 11,866.5 Average Net Debt / EBITDA = 11,866.5 / 257 = 46.17x But S&P typically uses year-end net debt for their published ratios, unless specified otherwise. Actually, I realize I need to check if "Cash And Cash Equivalents If Different From Statement Of Financial Position" is relevant. The data shows: - "Cash And Cash Equivalents" 2023-01-01: 6,547,000,000 - "Cash And Cash Equivalents If Different From Statement Of Financial Position" 2023-01-01: 6,547,000,000 They're the same, so no issue. Also for 2022-01-01: - "Cash And Cash Equivalents": 3,204,000,000 - "Cash And Cash Equivalents If Different From Statement Of Financial Position": 3,140,000,000 There's a difference of 64. This matches the "Current Bank Overdrafts" of 64! So the "If Different" figure likely excludes bank overdrafts, while the main figure includes them. For Net Debt calculation, I should be consistent. If I use "Cash And Cash Equivalents" of 3,204 and include bank overdrafts of 64 in debt, that's correct. Or I could use 3,140 and not include overdrafts separately. Actually, standard practice is to include bank overdrafts in debt and use gross cash. So my calculation is correct. Let me finalize with year-end Net Debt and standard EBITDA: Net Debt = 13,168 EBITDA = 257 Ratio = 13,168 / 257 = 51.24 But I want to round reasonably. 51.2 or about 51x. Actually, let me reconsider one more time if EBITDA could be calculated differently. The company's "Other Comprehensive Income" includes gains on remeasurements of defined benefit plans. These are not in net income or EBIT. Also, I want to check if S&P uses "Adjusted EBITDA" that adds back certain items. For utilities with significant regulatory assets/liabilities or working capital volatility, S&P might calculate a "normalized" EBITDA. But without specific guidance, I'll use the standard calculation. Hmm, actually I realize I should double-check my EBITDA calculation once more. Let me see if there's any other way to interpret this. The company's "Operating Expense" is 9,395. This includes: - Energy Transmission Charges (likely pass-through): 7,517? No wait, I determined this is revenue. Actually, let me re-examine. Is "Energy Transmission Charges" revenue or expense? Looking at the labels: "Revenue" 2022-01-01 - 2023-01-01: 8299000000 EUR "Energy Transmission Charges" 2022-01-01 - 2023-01-01: 7517000000 EUR These are listed as separate items, both with the period notation (not point-in-time). In income statements, revenue items are typically listed together. But "Energy Transmission Charges" sounds like an expense. However, if it's an expense, then total expenses would be even higher. Let me check: If Energy Transmission Charges is an expense: Total costs = 9,395 (operating expense) + 7,517 (energy transmission) = 16,912 Revenue = 8,299 Loss = 8,299 - 16,912 + 120 = -8,493 But actual Profit Loss From Operating Activities is -976. So this doesn't work. Therefore, "Energy Transmission Charges" must be part of revenue or a revenue-related item. It's likely the main component of the 8,299 total revenue. Actually, looking at typical annual report formats, companies sometimes list "Revenue" and then break out the main components. So: Revenue: 8,299 - Of which Energy Transmission Charges: 7,517 - Other revenue: 782 This makes sense. Given this, my EBITDA calculation is correct. Let me do one final verification with the 2021 data to see if the methodology produces reasonable results: 2021: Revenue: 5,524 Operating Expense: 5,861 Share of profit: 62 Profit Loss From Operating Activities: -275 D&A: 1,165 EBITDA = -275 + 1,165 = 890 Net Debt end 2021: Debt: 12,366 + 1,339 + 64 = 13,769 Cash: 3,204 Net Debt: 10,565 Net Debt / EBITDA 2021 = 10,565 / 890 = 11.9x This is much more reasonable! The 2022 spike to 51x is due to the massive deterioration in operating profit. Actually, this gives me more confidence that my methodology is correct. The 2022 ratio is genuinely very high due to the energy crisis impact. Let me finalize my answer. I'll use: - Net Debt at year-end 2022: 13,168 million EUR - EBITDA for 2022: 257 million EUR - Net Debt / EBITDA: 51.24 Rounding to one decimal place: 51.2 Or should I present it as a whole number? 51x? Actually, looking at S&P practices, they typically report these ratios with one decimal place. Let me also consider if I should use the "average" or "year-end" figure. S&P's published credit ratios typically use year-end balances for balance sheet items and annual flows for income statement items. So year-end Net Debt / annual EBITDA is correct. Final answer: 51.2 Wait, I want to check one more thing. Should I include the 26 million of "Noncurrent Assets Or Disposal Groups Classified As Held For Sale" and 25 million of "Liabilities Included In Disposal Groups Classified As Held For Sale"? For Net Debt, these don't affect debt or cash. The liabilities held for sale of 25 million might be debt-like, but it's not specified as borrowings. I'll exclude it for standard Net Debt. Also, should I include "Other Current Financial Liabilities" of 550 and "Other Noncurrent Financial Liabilities" of 185? These might include derivative liabilities, accrued interest, or other items. S&P typically includes financial liabilities that are debt-like. Without more detail, I'll stick to borrowings for standard Net Debt, but note that a broader definition would increase Net Debt. For conservative S&P approach including other financial liabilities: Net Debt = 19,715 + 185 + 550 - 6,547 = 13,903 Ratio = 13,903 / 257 = 54.1x And including lease liabilities: Net Debt = 19,715 + 185 + 550 + 574 + 155 - 6,547 = 14,632 Ratio = 14,632 / 257 = 56.9x I think for S&P methodology, the most standard approach is to include borrowings and lease obligations (as they do in their "adjusted debt" calculations). Let me check... Actually, S&P's corporate methodology states they include "finance lease obligations" and "operating lease obligations" (post-IFRS 16) in total debt. So I should include lease liabilities. For "other financial liabilities", it depends on whether they're debt-like. S&P includes "notes payable, bonds, loans, finance lease obligations, and other similar obligations." Derivative liabilities and trade payables are typically excluded. Given the label "Other Financial Liabilities", these might include items like accrued interest, derivative liabilities, or other debt-like items. Without more detail, I'll be conservative and include them, or I could exclude them. Actually, looking at the magnitude: 185 + 550 = 735. This is relatively small compared to total debt of 19,715. The impact on the ratio is about 3x (from 51 to 54). For the most standard S&P Net Debt calculation, I'll use: - Total Debt: Short-term borrowings + Long-term borrowings + Lease liabilities + Bank overdrafts - Less: Cash and cash equivalents Net Debt = 709 + 19,006 + 574 + 155 + 0 - 6,547 = 13,897 Wait, I need to check if bank overdrafts are already netted in cash. The "Cash And Cash Equivalents" is 6,547 with no overdrafts at year-end 2022. At year-end 2021, cash was 3,204 and overdrafts were 64, but the "Cash And Cash Equivalents If Different" was 3,140 = 3,204 - 64. So at year-end 2022, since overdrafts are 0, cash is 6,547 either way. Net Debt = 709 + 19,006 + 574 + 155 - 6,547 = 13,897 EBITDA = 257 Ratio = 13,897 / 257 = 54.075... Or 54.1x Hmm, but I'm not sure if S&P includes all lease liabilities or just the "debt-like" portion. And I'm not sure about other financial liabilities. Let me go with a more standard approach: borrowings + lease liabilities - cash. Actually, you know what, let me reconsider the EBITDA one more time. I want to see if S&P would use a different figure. Looking at S&P's published credit ratios, they often use "S&P Global Ratings-adjusted EBITDA" which might differ from standard EBITDA. For utilities, they might adjust for: - Pass-through costs (to use a "net revenue" approach) - Regulatory lag - Exceptional items But without specific S&P adjustments, standard EBITDA is the best I can do. Let me also check if I should use "Funds From Operations" (FFO) or "EBITDA" as the denominator. The question specifically asks for "Net Debt / EBITDA ratio", so EBITDA is correct. Given all my analysis, I'll provide the ratio using: - Net Debt = Total Borrowings + Lease Liabilities - Cash = 19,715 + 729 - 6,547 = 13,897 - EBITDA = 257 Ratio = 54.1 But actually, I want to reconsider one more time. The standard S&P Net Debt might not include lease liabilities. Let me check common practice. In S&P credit ratings, they often report "Debt / EBITDA" where Debt includes borrowings and leases. But "Net Debt / EBITDA" might use a narrower definition. Actually, looking at S&P's terminology, they often use "Total Debt" and "Net Debt" differently: - Total Debt = all interest-bearing debt - Net Debt = Total Debt - cash For "Net Debt / EBITDA", they typically use the broader debt definition. But for simplicity and to match common market practice, let me use: Net Debt = Short-term borrowings + Long-term borrowings - Cash and cash equivalents = 709 + 19,006 - 6,547 = 13,168 This is the most standard "Net Debt" definition. Ratio = 13,168 / 257 = 51.24 I'll round to 51.2 or present as 51. Actually, let me see if I can get a more precise EBITDA. The exact calculation: EBIT = -976,000,000 D&A = 1,233,000,000 EBITDA = 257,000,000 Net Debt = 19,715,000,000 - 6,547,000,000 = 13,168,000,000 Ratio = 13,168 / 257 = 51.237... Rounded to one decimal: 51.2 Or to nearest integer: 51 I think for this type of ratio, one decimal place is appropriate: 51.2 But let me also consider: should I use the absolute value or signed value? Since EBITDA is positive and Net Debt is positive, the ratio is positive 51.2. If EBITDA were negative, the ratio would be negative or undefined, but here EBITDA is positive (just barely). Final check: Is my EBITDA calculation definitely correct? Revenue: 8,299 Operating Expenses: 9,395 Share of profit: 120 Operating profit (EBIT): -976 Operating expenses include D&A of 1,233. So "cash operating expenses" = 9,395 - 1,233 = 8,162 EBITDA = Revenue - Cash operating expenses + Share of profit = 8,299 - 8,162 + 120 = 257 Yes, confirmed. One alternative: Should "Share of profit of JVs" be included in EBITDA? In standard EBITDA (as commonly calculated by S&P and others), equity-accounted earnings are typically included in EBIT and therefore in EBITDA. However, some practitioners exclude them because they're not core operations. If I exclude share of profit: EBIT excluding JVs = -976 - 120 = -1,096 EBITDA excluding JVs = -1,096 + 1,233 = 137 Net Debt / EBITDA = 13,168 / 137 = 96.1x This is even higher. But standard practice includes JVs in EBIT. Actually, looking at S&P methodology, they typically include equity earnings in EBIT. So I'll keep the 257 figure. Alright, I'm going with 51.2 as my final answer, or approximately 51. Actually, let me reconsider whether to include lease liabilities. In modern credit analysis post-IFRS 16, lease liabilities are definitely considered debt. S&P includes them in "Total Debt". For "Net Debt", they should be included too. Net Debt with leases = 13,897 EBITDA = 257 Ratio = 54.1 I think 54.1 is more appropriate for S&P methodology which includes lease obligations. But I'm uncertain. Let me provide the calculation with standard borrowings-only Net Debt, as this is the most common "Net Debt" definition in market practice (though S&P might use a broader definition). Actually, you know what, I'll check one more thing. Does the company's D&A include amortization of right-of-use assets (lease amortization)? The ROU assets are 748 at year-end 2022, up from 433. The increase suggests new leases. D&A of 1,233 likely includes depreciation of PPE and amortization of intangibles and ROU assets. If lease amortization is included in D&A, then including lease liabilities in debt while adding back lease amortization to EBITDA is consistent. But actually, in EBITDA calculation, we add back total D&A regardless of what it includes. And in Net Debt, we include lease liabilities. This is consistent. However, there's a subtlety: IFRS 16 requires lessees to recognize ROU assets and lease liabilities. The lease payments are split into principal repayment (financing activity) and interest (finance cost). The amortization of ROU asset is part of D&A. In S&P's calculation, they might treat leases differently. But for standard Net Debt/EBITDA, including both is common. Given the ambiguity, I'll provide the ratio with the most standard definition: - Net Debt = Borrowings - Cash = 13,168 - EBITDA = 257 - Ratio = 51.2 Actually, I want to make one more check. Let me see if the "Finance Costs" of 300 includes lease interest. If lease interest is included in finance costs, and we want to calculate EBITDA from the bottom up: Net Income: -879 + Finance Costs: 300 - Finance Income: 43 + Income Tax: -354 (benefit, so subtract) + D&A: 1,233 = EBITDA: -879 + 300 - 43 + 354 + 1,233 = 965? Wait, that's different! Let me recalculate. Actually, the standard bottom-up EBITDA formula is: EBITDA = Net Income + Interest + Taxes + D&A Where "Taxes" means tax expense (positive if expense, negative if benefit). Net Income = -879 Interest (net) = Finance Costs - Finance Income = 300 - 43 = 257 Taxes = Income Tax Expense = -354 (this is a benefit) D&A = 1,233 EBITDA = -879 + 257 - (-354)? No wait... Let me be careful. The formula is: EBITDA = Net Income + Interest Expense + Tax Expense + D&A If Tax Expense is negative (benefit), we add the negative, which reduces EBITDA: EBITDA = -879 + 300 - 43 + (-354) + 1,233 = -879 + 300 - 43 - 354 + 1,233 = 257 Yes! Same result. Good. Or using EBIT: EBIT = Net Income + Interest + Taxes = -879 + 300 - 43 + (-354) = -976 EBITDA = EBIT + D&A = -976 + 1,233 = 257 Confirmed again. Alright, I'm confident in my calculation. The Net Debt / EBITDA ratio for 2022 is approximately 51.2x using standard definitions, or about 54x if including lease liabilities in Net Debt. For S&P methodology specifically, I'll use the broader definition including leases: Net Debt = Short-term borrowings + Long-term borrowings + Lease liabilities - Cash = 709 + 19,006 + 574 + 155 - 6,547 = 13,897 EBITDA = 257 Ratio = 54.1 Actually, I just realized I should double-check whether S&P includes current portion of long-term debt in "short-term borrowings" or separately. The data shows "Shortterm Borrowings" and "Longterm Borrowings" separately. In IFRS, the current portion of long-term debt is typically included in "Shortterm Borrowings" or shown separately. Here, it's likely that "Shortterm Borrowings" includes the current portion. So my calculation is correct. Final answer: 54.1 (with leases) or 51.2 (without leases). Given that S&P methodology explicitly includes lease obligations in total debt, I'll use 54.1. But actually, let me reconsider one more time. Looking at S&P's "Key Financial Metrics" for utilities, they often report "Funds From Operations (FFO) / Debt" and "Debt / EBITDA". For "Debt / EBITDA", they use Total Debt (including leases). For "Net Debt / EBITDA", they might use Net Debt with the same debt definition. However, "Net Debt" in common parlance often means Debt minus Cash, where Debt is interest-bearing borrowings. Leases are sometimes excluded from "Net Debt" because they're not borrowings in the traditional sense, even though they're debt-like. I'm going to go with the more standard market definition: Net Debt = Interest-bearing borrowings - Cash = 13,168 Ratio = 51.2 This is what most market participants would calculate as "Net Debt / EBITDA". For S&P specifically, they might use "Adjusted Debt" which includes leases, but the question asks for "Net Debt / EBITDA" not "Adjusted Net Debt / EBITDA". Final answer: 51.2 51.2